Yongmao Holdings (SGX:BKX) Will Pay A Dividend Of CN¥0.01
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Yongmao Holdings' Projected Earnings Seem Likely To Cover Future Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Yongmao Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
EPS is set to fall by 11.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 2.7%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Check out our latest analysis for Yongmao Holdings
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from CN¥0.138 total annually to CN¥0.056. The dividend has shrunk at around 8.6% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Yongmao Holdings' EPS has declined at around 11% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yongmao Holdings' payments, as there could be some issues with sustaining them into the future. While Yongmao Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for Yongmao Holdings (2 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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